How Will New Financial Disclosure Laws Affect You?
The passage of new commercial financial disclosure laws has created considerable attention and questions around what their impact will be.
To date, 15 states have proposed such legislation and six states—California, Connecticut, Florida, Georgia, New York, Utah and Virginia—have enacted commercial financial disclosure laws. It is widely expected that other states will introduce similar legislation.
The purpose of the new laws is to provide consumer-style disclosures to commercial financing recipients to ensure that they have full information from the financing provider of certain terms and conditions such as annual percentage rate, total amount of commercial financing, finance charges, payment methods, and repayment terms. It enables recipients to highlight such key terms, as well as provide a format to easily compare against other providers’ offers to make a more informed financial decision.
What’s Changed?
Essentially, the new disclosure requirements add a step in the lending process. Providers must send recipients a disclosure statement before the commercial financing transaction is consummated. Specific requirements related to the disclosures, such as when they must be provided and whether they must be signed by the recipient, are set forth in the various state laws and regulations. At Mitsubishi HC Capital America, our disclosure requirement process and the time to acceptance is a paramount priority. When signatures are required, we’re using e-signature capabilities to simplify the process so the customer doesn’t need to make an additional trip—or two—to sign the disclosure, then the document package. We can also send the disclosure statement directly to the customer and copy the vendor or dealer so they can track the progress of the transaction.
Who must comply?
The states have varying disclosure requirements. Generally, providers of commercial financing products such as term loans, factoring, sales-based financing, certain lease financing and asset-based lending transactions, may be subject to the new laws, though certain exemptions may exist (such as for certain financial institutions).
Why get financing from an independent lender?
The additional step of providing a disclosure statement before presenting the lending agreement may appear to be an inconvenience, but the requirements for compliance shouldn’t take away from the significant benefits of working with an independent commercial finance provider.
Our bench is deep with experts who understand the details and complexities of these requirements.
Mitsubishi HC Capital America works with borrowers and lessees on an individual level, learning their business models, customer base and goals. As a result, we offer more than financial resources, but a true, long-lasting partnership that’s built on trust, stability, and parallel growth objectives.
The views expressed in this article belong solely to the authors and do not necessarily represent the views or position of Mitsubishi HC Capital America, Inc., any of its affiliates or subsidiaries, or any other person. This is for general informational purposes only and is not intended and should not be taken as legal advice. You are encouraged to seek independent legal counsel.